Is retirement at age 65 priced out of most people’s range?
For decades, 65 has been the age when we are all expected to get the golden handshake. After all, it’s also the age when government pensions kick in.

But new research from Chartered Professional Accountants of Canada (CPA Canada), reported in Wealth Professional magazine, suggests many of us won’t be able to afford to hang it up at 65.

CPA Canada found a 42 per cent of working, unretired Canadians “think they will still be working past 65,” the magazine notes. Twenty per cent of respondents cited saving for retirement as “their most substantial financial concern,” with 17 per cent saying paying off debt is their top financial priority, the magazine notes.

On the plus side, 41 per cent of those surveyed think their finances will improve over the next year, reports the magazine. Forty-five per cent think things will stay the same, and 11 per cent worry their finances will get even worse, Wealth Professional notes.

Other findings noted in the article: 74 per cent of those surveyed said they save monthly, with 63 per cent having a savings account and 52 per cent having TFSA savings. Eleven per cent admitted they had no savings of any kind, the magazine noted.

CPA Canada’s Doretta Thompson, director, corporate citizenship, told Wealth Professional that while it is “welcome news” that so many Canadians feel their finances will improve, there needs to be “more financial literacy education, particularly around retirement saving and debt management.”

A final note from the article – most surveyed were concerned that rising interest rates would make it harder for them to save, as the cost of servicing their debts would go up.

It’s important to make savings automatic and regular, a “pay yourself first” scenario. An excellent way to achieve this goal is to set up automated savings with the Saskatchewan Pension Plan. You can contribute up to $6,000 a year to SPP, and you can do it at your own speed. And when you retire, SPP can help you turn those savings into a monthly income stream.

Perhaps the dream of retirement at 65 is harder than it used to be, but SPP does provide you with the tools you need to make it happen.

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Today I’m interviewing Saskatchewan financial planner Chet Brothers for savewithspp.com. He formed Brothers and Company Financial, an independent planning and wealth management firm in 1994 after spending a number of years at the wealth management subsidiary of a large Canadian financial Institution. He’s experienced in all aspects of personal finance and wealth management.

Brothers has dedicated his professional career to educating the public and financial advisers about the importance of comprehensive financial planning. His professional qualifications include Certified Financial Planner and Registered Financial Planner designations. He also served his profession as past president of the Institute of Advanced Financial Planners and he is currently on the board of the Canadian Institute of Financial Planners. He came to my attention as Wealth Professional Magazine recently named him one of only two Saskatchewan financial planners on their Canada’s Top 50 Advisers’ list in 2015.

Thank you so much for joining me today Chet.

You’re welcome.

Q. How did you get into the business of financial planning?
A: I started in investment sales and was looking for a career that offered lifetime learning opportunities. So I upgraded and moved into the financial planning area.

Q. How do you think Canadians can benefit from working with a financial planner?
A: I think a financial plan really makes the most efficient use of all the resources that an individual or a family has at hand to enable them to realize the hopes and dreams they have for themselves, their family, and their community.

Q. Are your clients typically close to retirement or do you work with a broad spectrum of clients developing financial plans?
A: I would say if you looked at the bell curve, the peak would be people either five years before or five years after retirement. But we do deal with the entire spectrum. Often as people get closer to retirement, the importance of financial planning becomes clear to them and they seek out advice.

Q. What should people who require financial planning services be looking for? What questions should they be asking?
A: First, I think you want to make sure you are dealing with an accredited person with a professional designation — either the CFP or RFP or hopefully both. You want to make sure that they have some experience. Let them practice on someone else. I started at a large financial institution, essentially apprenticing. They also need to have a defined and tested investment strategy and a comprehensive approach. If someone wants to talk to you just about your investments and hasn’t asked you about your will or your power of attorney, I’d run.

Q. Do you sell products like securities or insurance or are you an independent adviser?
A: I am an independent adviser who is licensed in securities and insurance. In order to implement a financial plan in this country, you need to be licensed to sell individual securities, mutual funds or insurance. So, we do implement plans and we are licensed.

Q. How are you compensated? Do people pay a flat fee or an hourly rate to have a financial plan developed or are you on commission?
A: To develop a financial plan, we charge an hourly rate of $175/hour. At that point, the client can do what they want with the plan. If they choose to implement with us, then we will use the products and services available to us and we’ll offset that fee. If someone were to use our investment services, any revenue that we receive from the investments or insurance would offset the fees that they paid for the financial plan in first 18 months.

Q. If a client has little knowledge of investment products how do you educate them or how can they educate themselves so they make wise investment choices?
A: Investing is not rocket science. There are two basics: ownership or “loanership.” After that, explaining how markets work is not all that complicated. I think the industry makes it unnecessarily complicated for people. Most people grasp pretty quickly that if they are buying a fraction of a business, they have to identify what are good businesses. It’s a lot harder to determine whether it’s the right price to pay or not.

Q. How important is asset allocation from a risk management perspective? In other words, what portion of a client’s portfolio should be stocks, bonds or other assets? How do you decide what split to recommend for a client?
A: It depends on the client’s situation. But it’s also important to know that, just moving around asset classes doesn’t necessarily reduce risk. You want to make sure that you reduce the risk at the source. Buying quality is the first step.

That is if you’re going to buy into the equity market you should be buying quality, profitable businesses that pay dividends. That will reduce your risk on the equity side. On the debt side, you want to make sure that you are buying quality debt obligations of borrowers who can pay you back. You also want to make sure that the duration is reasonable.

The next step would be to determine what asset mix is appropriate. I think in very few instances would it be appropriate to have 100% of your money in ownership of businesses, just because most people can’t handle the volatility. They wouldn’t stick with program, and they’d bail.

For most people, depending on age and stage and their experience, we would add more or less fixed income to a portfolio. There’s no exact formula. It’s determined through the financial plan, interviews and getting a sense of their ability to handle volatility.

Q. When you are developing a financial plan or a retirement plan for a client do you consider the equity in the family home as a potential source of retirement income?
A: No. I generally wouldn’t. In a financial plan sometimes we run the plan out beyond age 80 and there could be a short fall. Then it’s conceivable someone would sell their home and move into a rental, or a long term care facility.

But, your home is your home. Borrowing or taking equity out of the home makes no sense. The other argument is “We’ll downsize when the kids are gone.” However, in this market, condos cost almost as much as stand-alone homes or more. There’s no real way to get equity out, in my opinion.

Q. There’s an ongoing debate in the media and the financial industry about actively managed portfolios versus passive index products. What are your views on the subject?
A: I think it’s funny, because the stats show that only 20% or 25% percent of actively managed portfolios beat the index. But zero percent of passive investments beat the index!

The only index or benchmark that a person needs to care about is the number that is in their financial plan. If you need five percent return on your investments over your lifetime to give you all of the things that you dreamed about for yourself, your family, and your community then, it’s irrelevant what the markets do as long as you get it.

Q. So, you are not an advocate necessarily of just an index or passive approach?
A: If you take an index or passive approach the problem is, which index? You’re making a market call. It’s incredibly risky. People who do so have made a huge call based on zero or little if not knowledge.

Q. Congratulations. I see you’ve been named one of Canada’s Top 50 Advisers in 2014. Tell me how this process took place and how you were ultimately named to the list?
A: Wealth Professional Magazine does an annual survey. We took part in 2014 and 2015. They base their decision on the number of clients, growth of client assets under management and other factors. And we were fortunate for two years in a row that we made the list.

It’s an honour to be on the list. But it’s certainly not how we measure our success. We measure the success of this business by the success or our clients. What we focus on is their results which we monitor and measure.

Q. The Saskatchewan Pension Plan’s Balance Fund in which non-retired members are invested earned 9.1% in 2014 and an average of 8.16% over the plan’s 29 year history. Do you think that participating in SPP can form a valuable part of an individual’s overall investment strategy?
A: Yes. Those are reasonable returns. I think that the hardest thing is accumulating the money in the first place. If you’re not doing anything else, the Saskatchewan Pension Plan makes it very easy to accumulate money at a reasonable price. Putting money into that pension plan on regular basis is a great starting spot. If you have more significant assets or a more sophisticated situation, or you are a more sophisticated investor, there may be other places to look. But, for a vast majority of people it is a place to start because SPP does some of the heavy lifting to help you save money.

Q. Thank you Chet. I really appreciate talking to you . It was a pleasure to speak to you today.
A: My pleasure.

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This is an edited version of a podcast interview recorded on April 15, 2015.